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CPI: The Games Continue

Everyone who drives knows that gas prices increased more than 3% month-over-month – the official, seasonally adjusted numbers from the BLS in this morning’s CPI report. Data put together by non-governmental sources confirms it.But, folks like GasBuddy and AAA aren’t responsible for cost of living adjustments for millions of Americans. So, unlike the BLS, they have no incentive to fudge the numbers. Maybe they’re also aware that gas stations don’t allow customers to pay the “seasonally-adjusted” price.

Using the EIA’s (also fudged) numbers, gas prices were up 6.2% for April — more than twice BLS’ goal-seeking 3%. So, the BLS was able to report 0.2% instead of the 0.3% expected for April CPI.Similar games are played, of course, with respect to shelter (+3.4% YoY,) medical care (+2.2%) and vehicles (-1.6% new, -0.9% used.) I’ll pick on vehicle data this morning, as it illustrates another shortcoming of the BLS approach.

Consumers buy food and gas every few days, while they tend to hold on to vehicles for several years at a time. Even if vehicle prices were to drop, that savings wouldn’t flow through to a consumer until they purchase a vehicle. When they did, of course, they’d be hit with higher interest rates than were in place last month or last year.

The algos don’t care much about the veracity of the numbers. Futures are up 8 points ahead of the open — another overnight VIX bashing that has it below the SMA200 and about to test the .886 Fib and channel midline at 13.23ish. While it’s nice to nail a forecast, it’s distressing to see how easily the algos can be manipulated. The flip side of under-reporting inflation, of course, is the effect it has on currencies and interest rates. With “no” inflation pressure, interest rates have receded from 3% — sapping some of the dollar’s strength.continued for members…